Yahoo Finance Here's Why Shareholders May Want To Be Cautious With Increasing CVS Health Corporation's (NYSE:CVS) CEO Pay Packet
Key Insights
CVS Health to hold its Annual General Meeting on 16th of May
Salary of US$1.50m is part of CEO Karen Lynch's total remuneration
The overall pay is comparable to the industry average
CVS Health's three-year loss to shareholders was 28% while its EPS grew by 1.1% over the past three years
In the past three years, the share price of CVS Health Corporation (NYSE:CVS) has struggled to grow and now shareholders are sitting on a loss. However, what is unusual is that EPS growth has been positive, suggesting that the share price has diverged from fundamentals. These are some of the concerns that shareholders may want to bring up at the next AGM held on 16th of May. Voting on resolutions such as executive remuneration and other matters could also be a way to influence management. We think shareholders might be reluctant to increase compensation for the CEO at the moment, according to our analysis below.
Check out our latest analysis for CVS Health
Comparing CVS Health Corporation's CEO Compensation With The Industry
Our data indicates that CVS Health Corporation has a market capitalization of US$69b, and total annual CEO compensation was reported as US$22m for the year to December 2023. That's mostly flat as compared to the prior year's compensation. While we always look at total compensation first, our analysis shows that the salary component is less, at US$1.5m.
In comparison with other companies in the American Healthcare industry with market capitalizations over US$8.0b, the reported median total CEO compensation was US$17m. From this we gather that Karen Lynch is paid around the median for CEOs in the industry. What's more, Karen Lynch holds US$28m worth of shares in the company in their own name, indicating that they have a lot of skin in the game.
Component | 2023 | 2022 | Proportion (2023) |
Salary | US$1.5m | US$1.5m | 7% |
Other | US$20m | US$20m | 93% |
Total Compensation | US$22m | US$21m | 100% |
On an industry level, roughly 21% of total compensation represents salary and 79% is other remuneration. In CVS Health's case, non-salary compensation represents a greater slice of total remuneration, in comparison to the broader industry. It's important to note that a slant towards non-salary compensation suggests that total pay is tied to the company's performance.
A Look at CVS Health Corporation's Growth Numbers
CVS Health Corporation's earnings per share (EPS) grew 1.1% per year over the last three years. Its revenue is up 9.0% over the last year.
We would argue that the improvement in revenue is good, but isn't particularly impressive, but it is good to see modest EPS growth. So there are some positives here, but not enough to earn high praise. Moving away from current form for a second, it could be important to check this free visual depiction of what analysts expect for the future.
Has CVS Health Corporation Been A Good Investment?
With a three year total loss of 28% for the shareholders, CVS Health Corporation would certainly have some dissatisfied shareholders. This suggests it would be unwise for the company to pay the CEO too generously.
In Summary...
The fact that shareholders are sitting on a loss on the value of their shares in the past few years is certainly disconcerting. The fact that the stock price hasn't grown along with earnings may indicate that other issues may be affecting that stock. Shareholders would probably be keen to find out what are the other factors could be weighing down the stock. These concerns should be addressed at the upcoming AGM, where shareholders can question the board and evaluate if their judgement and decision making is still in line with their expectations.
It is always advisable to analyse CEO pay, along with performing a thorough analysis of the company's key performance areas. In our study, we found 2 warning signs for CVS Health you should be aware of, and 1 of them is potentially serious.
Important note: CVS Health is an exciting stock, but we understand investors may be looking for an unencumbered balance sheet and blockbuster returns. You might find something better in this list of interesting companies with high ROE and low debt.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
